Reuters is today reporting, “Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.”

Norton Ng, an account manager at a Centaline Property real estate told Reuters, “Some of the mainland sellers have liquidity issues – say, their companies in China have some difficulties – so they sold the houses to get cash.”

There are people suggesting that it will not happen here (we are different again) with the Chinese that have invested in Australia. Not sure of that. I think we will see de-leveraging and a flow of capital back to China as the economy there comes off the rails.

Experts are saying this is different to the false triggers we had in 2011. “In 2011, real demand for properties in most cities was still strong,” he says. “Today, this is no longer the case, as an oversupply problem appears to have materialised in many third and fourth-tier cities, and this is set to worsen.”

The most over supply is in the third and forth tier cities, “This is comparable to when the US property bubble burst, since property prices did not collapse in New York, but instead in places like Orlando and Las Vegas,”

“In China, the true risks of a sharp correction in the property market fall in third and fourth-tier cities, which are not on investors’ radar screens, not Beijing or Shanghai.”

It has already happened before when the Japanese economy started to deflate. The Gold Coast was particularly affected when large property investments were liquidated and repatriated back to Japan. China will have a bigger impact but this time it will be Sydney & Melbourne.

I find myself wondering, if this a first generation of unfettered business wealth of the Chinese “1%” coming out of revolution etc why do we assume that they really know what they are doing ? I would expect people in a huge first experiment with capitalism to be more susceptible to bubble building than the “old money” and the old money of the west is still slow to learn. Interesting times ahead.

Falling interest rates in Australia would encourage global investors to be looking for gains in asset prices. The rocket that has been put under house prices in Australia recently would indicate to me that these gains have started to subside and the savvy investors should be looking to take their gains and head for the exits before the stampede.

Like most of you guys I am just sitting back with the popcorn watching and waiting for the rush to get rid of such illiquid assets, its going to be fun to watch.